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China warns that its rare earth minerals are running out

The Chinese government has put out a white paper detailing the current status of its rare earth metals industry, and the prognosis is not promising.

For two decades the nation has been the world's main supplier of rare earth minerals -- a collection of 17 elements, including scandium, yttrium and lanthanum, which are vital in the production of modern electronic technology.

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However, China is now pressing other countries to increase their own production capability.

The white paper outlines a series of challenges currently facing China's extraction of rare earth minerals. China holds 23 percent of the world's total quantity of minerals, mostly sourced from three main sites in the south of the country. Those sites are now heavily depleted to the extent that China believes two-thirds of their total supplies have now been mined, and the remaining seams are of a much poorer quality which will increase the cost of extraction.

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Illegal mining, and the theft of supplies, has also meant that prices have been kept far lower than China believes they should be -- so as demand for copper, iron and other metals has shot up over the past 20 years, rare earth mineral demand has not increased prices commensurately.

This all adds up to a huge overcapacity in extracting and exporting rare earth minerals, and it doesn't help that the mining process (particularly the illegal side) has had a vast and damaging environment impact on the Chinese countryside. Deforestation, landslides and flooding are regularly attributed to mining operations.

The Chinese government's response to these challenges has been to try and take more control over the industry. That means cracking down on illegal mining, imposing more stringent environmental regulations, paying to repair environmental damage, and also imposing export controls on rare earth minerals. Hence China asking other countries with lots of potential rare earth mineral capacity -- like the US, Brazil or Australia -- to begin trying to source their own supplies as Chinese exports slow down.

The current near-monopoly China holds on rare earth minerals came as a result of the country massively ramping up its production levels through the 1980s and 1990s. By the time China joined the World Trade Organisation in 2001 its exports of rare earth minerals had grown so large, and worldwide prices plunged to new lows, that mines around the rest of the world were forced out of business. The new export controls will undoubtedly have knock-on effects for the prices of electronic goods around the world, though some countries are well along the way to sourcing their own replacement minerals (like the US, which has reopened its Mountain Pass mine in California).

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Despite their name, rare earth minerals are not particularly rare -- they are actually dispersed quite evenly throughout the earth's crust. Mining is only economically viable in those few locations where the seams are particularly rich.